KHARTOUM) – Sudan’s ruling National Congress Party (NCP) Wednesday said that subsidies would be lifted gradually admitting the move will negatively impact on the poor and low-income families.
On Monday, Sudan’s finance minister Badr al-Din Mahmoud urged the National Assembly legislators to approve the 2016 budget including lifting of government subsidies on wheat, flour, fuel and electricity in order to avoid economic collapse.
The chairman of the NCP’s economic sector in Khartoum state Al-Mahi Khalafalla stressed that the lifting of subsidies is part of the economic reform program, saying it would be implemented gradually according to a well-thought plan to remove the distortions of the national economy.
He told the official news agency (SUNA) that the poor and vulnerable sections of the society must be put into consideration when the gradual lifting of subsidies is implemented.
“Subsidizing commodities doesn’t [help] achieve social justice [in the country] because nobody is benefiting from government subsidies but the [foreign] diplomatic missions and the rich people,” he said.
Khalafalla added that subsidized goods are being smuggled to neighbouring countries where they are sold at higher prices, pointing the government couldn’t control Sudan’s vast borders to prevent smuggling operations.
The NCP official underscored the need to direct part of the subsidies money to build a wide social security network to offer health insurance and financial support for the productive and the low-income families.
He also stressed the importance to direct large amounts of the subsidies money to increase the production and the productivity to achieve the goals of the economic reform program including improving the living conditions and increasing exports.
Khalafalla further noted that the 2016 budget must include an increase in government employees’ salaries because lifting of subsidies would provide real financial resources and help avoid deficit financing which increases inflation rate.
Sudan’s economy was hit hard since the southern part of the country declared independence in July 2011, taking with it about 75% of the country’s oil output.
However, the government succeeded in bringing inflation rate down from a high of 46.8% in July 2014 to 11.3% in August 2015 but ordinary citizens continue to complain from cost of living increases that impaired their access to basic commodities.
Also, the Sudanese pound has lost 100% of its value since South Sudan’s secession. The exchange rate of the US dollar on the black market has reached 11.5 Sudanese pounds (SDG).
The official dollar exchange rate stated by the Central Bank of Sudan (CBoS) is around 6.1 SDG.
The curtailment of fuel subsidies in September 2013 almost doubled prices of gasoline and diesel, triggering some of the worst protests Sudan has seen in years.
The International Monetary Fund (IMF) at the time approved of Khartoum’s decision saying that fuel subsidies “disproportionately” benefit the rich, but called for “a new package of corrective measures”, including addressing fiscal imbalances and tax reforms.
In august 2014, the Sudanese government announced the implementation of the five-year program as an extension of the tripartite program, which included the partial lifting of subsidies in 2012 and 2013.
It also agreed to the International Monetary Fund (IMF) Staff-Monitored Program (SMP) to help it achieve a set of economic and financial policies and objectives which include sustaining economic growth, controlling inflation, reforming the banking sector and reducing budget deficit among others.
Culled from Sudan Tribune